The bullish case for agriculture investments is based largely on demographics. According to the United Nations, the world's population is projected to rise to 9.1 billion by 2050, from 6.8 million in 2009. In addition to their expanding ranks, the planet's residents are becoming wealthier and more urban, two trends that are fueling growing demand for meat and feed crops, such as corn and soybeans.

The world will have 9.1 billion people by 2050, up from 6.8 billion in 2009. That's a lot more mouths to feed.
Curtis Parker for Barron's

The U.N.'s Food and Agriculture Organization estimates that agricultural production will need to increase by at least 70% worldwide between now and 2050 to meet the needs of more protein-hungry populations, particularly in the developing world. That means almost a billion more tons of annual cereal production and 200 million more tons of meat. In the emerging markets alone, the FAO sees annual investments of $83 billion in agricultural production and "downstream" services such as processing and storage, not to mention billions of dollars for seeds, fertilizer, farm equipment and irrigation to coax more production from the land. By 2050, the organization forecasts, the world will have only 5% more arable land than it did at the start of this decade.

Such numbers suggest immense long-term opportunities for a wide array of companies in the U.S. and abroad. "Getting better seeds, fertilizers, water pumps and farming equipment to where it's needed is what the private sector is well suited to accomplish," says Roy Steiner, deputy director of agricultural development at the Bill and Melinda Gates Foundation, a $36 billion humanitarian institution. "Smart companies can make a difference, and make a profit."

So, too, can smart investors, whether in agribusiness stocks and exchange-traded funds or commodities and farmland. For individual investors seeking broad exposure to the market, giant commodities processors such as
BungeBG 0.684596577017115%Bunge Ltd.U.S.: NYSEUSD82.36
0.560.684596577017115%
/Date(1427835784381-0500)/
Volume (Delayed 15m)
:
1389728AFTER HOURSUSD81.745
-0.614999999999995-0.7467217095677513%
Volume (Delayed 15m)
:
92199
P/E Ratio
25.68212292244847Market Cap
11902636863.736
Dividend Yield
1.651287032540068% Rev. per Employee
1633170More quote details and news »BGinYour ValueYour ChangeShort position
(BG) and Archer Daniels (ADM) might be a good place to start. A major oilseed processor and commodities trader, Bunge hit a 52-week low of 54.03 last week, and is down 22% from an April high of 76.13. (Like most farm-related shares, the stock peaked at a much higher level in 2008, at 133.) Shares are trading for a discounted 8.3 times next year's expected earnings of $6.93 a share; 0.15 times estimated 2011 sales of $54.8 billion; and 0.7 times book value. Bunge is likely to benefit from rising demand, especially for sugar. Standard & Poor's has a 12-month price target of 81.

ADM might be an even better bet. Its shares, at 25.91, have fallen 30% from their 52-week high and are trading at levels last seen in 2006. Earnings are somewhat volatile and are expected to fall to $3.10 a share in the fiscal year ending next June 30 from $3.47 in fiscal '11. Analysts are estimating earnings of $3.39 for fiscal 2013. The shares trade for 8.4 times next year's estimated net, and about 20% of current-year sales. Some analysts see the stock returning to 35 in a year, propelled in part by rising prices for corn sweetener. ADM yields 2.5%, and Bunge, 1.7%.

Investors have been kinder to São Paulo-based
BRF Brasil FoodsBRFS 1.3839056893900563%BRF S.A. ADSU.S.: NYSEUSD19.78
0.271.3839056893900563%
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1282974AFTER HOURSUSD19.78
%
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2212
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18.60771401693321Market Cap
16885021193.9532
Dividend Yield
N/ARev. per Employee
N/AMore quote details and news »BRFSinYour ValueYour ChangeShort position
(BRFS), Brazil's No. 1 producer and exporter of poultry, pork and beef. Its American depositary receipts are up 8.6% this year, to 18, and trade at 14.8 times next year's estimated earnings of $1.24 a share. Says Juliana Rozenbaum, an analyst at the Brazilian bank Itaú, "the long-term story supports a prolonged growth cycle." In the near term, the company could benefit from tight beef supplies.

FARM-EQUIPMENT STOCKS such as
AgcoAGCO -0.8945288121489494%AGCO Corp.U.S.: NYSEUSD47.64
-0.43-0.8945288121489494%
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856071AFTER HOURSUSD47.643
0.003000000000000110.006297229219143577%
Volume (Delayed 15m)
:
27394
P/E Ratio
10.851936218678816Market Cap
4251406977.55676
Dividend Yield
1.0075566750629723% Rev. per Employee
467486More quote details and news »AGCOinYour ValueYour ChangeShort position
(AGCO), Deere and
CNH Global
(CNH) offer another way to play a long-term bull market in agriculture, as well as some positive near-term trends. The companies are benefiting from overseas growth and rising farm income in the U.S., which is expected to jump 31% this year, to $103.6 billion, according to the U.S. Department of Agriculture. That's the highest level, adjusted for inflation, since 1974.

Deere, the world's largest producer of farm machinery, beat fiscal third-quarter earnings estimates and raised its full-year profit forecast for the 12 months ending Oct. 31. "All the macroeconomic trends favor us, and we are having our best year in the history of the company," Deere CEO Sam Allen recently told Barron's. "Between now and 2050, the world must double food output. The right equipment in the right place can boost yields."

Analysts expect Deere to earn $6.44 a share in fiscal '11 and $7.21 in fiscal '12, and some see the stock hitting 90 in a year, up from last week's 66.57. The shares, which peaked in April at 99.80, sell for nine times next year's forecast, and yield 2.5%. Shares of CNH and
Titan InternationalTWI 2.74423710208562%Titan International Inc.U.S.: NYSEUSD9.36
0.252.74423710208562%
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:
675139AFTER HOURSUSD9.357
-0.00300000000000011-0.03205128205128205%
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:
966
P/E Ratio
N/AMarket Cap
489780915.990181
Dividend Yield
0.21367521367521367% Rev. per Employee
291620More quote details and news »TWIinYour ValueYour ChangeShort position
(TWI), which makes tires and wheels for farm vehicles, also have been decimated. CNH trades for 7.2 times and Titan for 7.6 times next year's estimated earnings, ratios well below those merited by the companies' expected profit growth.

Monsanto's Seeds and Genomics unit accounts for 73% of company revenue. "It is critically important that we improve both yield and productivity," says David Fischhoff, vice president of technology at Monsanto. The company is committed to doubling its yield in corn, soybeans and cotton by 2030 from 2000.

Gone are the days when Monsanto changed hands at 140 a share; the stock now trades for 71.29, up 2.4% for the year. Although it isn't a steal at 20.8 times estimated earnings for the August 2012 fiscal year, investors are getting double-digit profit growth and a management team focused on returning cash to shareholders through stock buybacks and rising dividends. Monsanto expects to raise seed prices in the current fiscal year, and is benefiting from growing demand in emerging markets.

The Bottom Line

Farmland is still expensive, but shares of agricultural-commodities companies, seed suppliers, and fertilizer and farm-equipment makers are a lot cheaper than they were just months ago.

FARMLAND IS THE MOST DIRECT WAY to invest in feeding the world, but it is also the least liquid. And, after surging in value in recent years, it is among the most expensive. Analysts at Rabobank calculate that the value of productive farmland has increased at a rate between 20% and 70% in the past five years, depending on location, with gains driven by higher commodity prices, low interest rates and a scarcity of available land—some of which has been acquired by financial buyers such as pension funds. The bank sees no near-term correction but thinks prices could fall some in three to seven years, as production costs and interest rates rise.

Legendary investor Jim Rogers views farmland as a long-term investment but notes that it's cheaper outside the U.S. "Myanmar is opening up as we speak, and there will be enormous opportunities there," he says. Angola and Cameroon also offer "magnificent opportunities in farmland."

Fortunately, you don't have to go to Cameroon to find compelling agribusiness investments these days. There are plenty ripe for the picking on Wall Street.

Up on the Farm

Agribusiness stocks and exchange-traded funds have been hammered this year, leaving many at tempting levels. Some, such as ADM and Deere, also pay nice dividends.